CVMA resolution targets AVMF financial woes

SCHAUMBURG, ILL. — Armed with $200,000 in the bank and a charitable mission to promote disaster preparedness, American Veterinary Medical Foundation (AVMF) leaders find themselves battling for the organization's life.

AVMF seeks support

In its quest to donate for disaster relief, AVMF teeters on financial catastrophe brought on by donation shortfalls and overspending, critics claim. Although spending constraints protect AVMF from bankruptcy, the American Veterinary Medical Association (AVMA) could sunset the foundation in favor of a smaller development office. Last month, the California Veterinary Medical Association (CVMA) publicly aired what Executive Board members have been grumbling quietly for years when it demanded the national association's leadership rein in the foundation. In a resolution to be heard before the House of Delegates in July, CVMA asks AVMA to take all steps necessary to bring down AVMF's administrative expense-to-income ratio from 79 percent in 2004 to 35 percent, the national average for non-profits.

AVMF leaders claim the attack is a product of misunderstandings and a general dislike for the foundation's vision. AVMA President Dr. Bonnie Beaver stands behind AVMF, noting "rumors and innuendoes are not based on actual facts." She predicts that before it's heard, the CVMA resolution might "disappear."

"The resolution addresses things that AVMA, as a separate entity, simply cannot do," she says. "I think this is a hiccup phase for the foundation, if you will. When you start throwing around numbers, you can come out with all kinds of results."

While some veterinary leaders view CVMA's charges as extreme, they echo widespread concerns heard among AVMA officials. In a 2004 letter to AVMF, Executive Vice President Dr. Bruce Little laid out eight management directives for fiscal responsibility, essentially asking the foundation to adhere to a checks and balances system for 2005. Two independent audits and a handful of meetings later, sound financial management has not happened, CVMA President Dr. Jon Klingborg says.

"We in California are doing the right thing here by bringing this to light," he says. "We don't want to embarrass the AVMA and AVMF, but we would like them to deal with this issue. I can't believe what a maelstrom this is."

Strained relationship

Dr. Jack Walther can. As immediate past president of AVMA, he's led a march for change within AVMF, heightened after a 2004 independent audit noted "serious problems" related to stakeholder conflicts, lack of direction and faulty operating within the foundation.

But as a membership association, AVMA is not responsible for the foundation and only appoints its directors and bylaws, Walther says. Although the two groups operate out of the same Schaumburg, Ill., office, they function as autonomous entities. The audit notes the relationship between the Executive Board and AVMF is strained and not clearly defined. AVMA's authority over the foundation is vague, the report says.

What the audit makes clear is that AVMF operating expenses are "unacceptable." In 2004, less than 23 cents of every donor dollar received was available for charitable works, the report says.

"We're businessmen, and this is like any business; the income just doesn't match expenses," Walther says. "There hasn't been any evidence of malfeasance, but there's definitely an issue with management style. I've been very concerned about this, and I'm not the only one. If you let something like the foundation crash and burn, it would be very difficult to start again."

On a mission

Critics fail to realize that the foundation runs as a charity, not a business; its charge is to give away money, says Dr. Robert Gordon, chairman of the AVMF Board of Directors. It's the foundation's mission to support Veterinary Medical Assistance Teams (VMATs) and disaster preparedness efforts led by state veterinary medical associations. Last year, the foundation gave $55,000 in disaster preparedness grants to states and $160,000 to AVMA to operate VMATs. That money depends on the foundation's fate, Gordon says.

"These funds don't happen unless the foundation exists," he says. "Our financial numbers can be manipulated to show whatever you want, and one donation can send our ratios off kilter. Our bank account is supposed to decrease."

A percentage of AVMF assets are restricted, designated by donors to fund specific purposes that do not fall within the foundation's vision. When that money runs out, it's not replaced, says AVMF Executive Director Paul Amundsen.

"We have been spending down restricted dollars, and that's deliberate," he says. "On that side of the ledger, it shows we're spending more than we're bringing in."

Amundsen refuses to expand on the politics between AVMF and AVMA, but Gordon says the rift stems from the national association's quest for more control. AVMF is not an AVMA committee or council, contrary to what some might believe, he says. "There are individuals who have not bought into the mission that the foundation has set for itself. We're perceived to be one of the Executive Board's underlings."

Outside review

Politics aside, AVMF cannot go bankrupt, foundation leaders say, because the organization cannot spend what it does not earn. Still, AVMF does not appear healthy, according to Charity Navigator, a non-profit service that ranks more than 4,000 aid organizations by evaluating their financial health. The independent database gives AVMF a one-star rating out of four, citing 2003 numbers that show program expenses eat 51.3 percent of all donations, which totaled $885,006. Nearly 35 percent goes to fundraising costs and 14 percent pays for administration. The service counts Amunden's $108,160 annual salary in fiscal year 2003 as 9.86 percent of foundation expenses that totaled $1,096,721 while revenue reached just $958,522.

That's 114 percent in expenses, says Dr. George Bishop, who introduced the resolution as California's delegate to AVMA. Using his background as CVMA treasurer, Bishop says he's poured through AVMF reports and meeting minutes to identify a financially troubled foundation.

"People are donating funds on the presumption that most of the balance is going to recipients," he says. "We feel responsible to our membership that we need to at least address this issue. It's either time to make this better known or do something about it."

In AVMF's defense

In a statement sent to

DVM Newsmagazine

, AVMF leaders note that disaster response giving has gone up annually since 1999, when unrestricted contributions totalled $264,515. Last year, AVMF received $708,912 while releasing $414,767 in grants and donations.

It costs money to make money, AVMF officials say, and although the foundation has existed since 1963, its disaster relief and preparedness charge wasn't adopted until recently. Since 2000, AVMF has spent 26 cents to 57 cents to raise $1, compared to $1.06 to raise $1 in 1999. That's not unusual for a start-up charity, AVMF officials claim.

At presstime, a 2004 financial audit of AVMF was slated for release. Gordon notes that while data might appear unflattering, there are legitimate reasons behind some deflated figures.

For example, auditors previously chided AVMF for ridding the program of an "earn $20,000 or give $20,000" stipulation for board members after leaders expressed desires to have the condition removed. Gordon questions the AVMA Executive Board's commitment to AVMF, citing its members rarely, if ever, donate to the foundation.

"If you're not part of the solution, you're part of the problem. They say 'fix the ratio' and donations do that," he says. "This mess is just filled with innuendo and half truths. No matter how many times and how many ways we attempt to explain that the foundation is not a business, it's not comprehended. There are many people out there who suspect the foundation will be gone by July."

Allegations of mismanagement

If July spells the end for AVMF, it's because Executive Board members will meet during the AVMA's annual convention in Minneapolis and likely peruse the foundation's fiscal statements. A 2004 fundraiser in California damaged AVMF ratios when the foundation's San Mateo committee booked a "super party," spending $63,158 and going three times over budget to net $44,405. While AVMF leadership had no direct control over the event's expenditures, the results hurt the foundation's numbers, Gordon says.

"But even if it did cost more, it earned money we didn't already have," he says.

The Auxiliary to the AVMA also has highlighted reported AVMF financial mismanagement and until last year seemed content with the foundation administering its $2 million-plus student loan fund. The Auxiliary had paid the foundation approximately $39,000 a year to run its accounts, but at presstime, was taking steps to regain control. According to audit reports, virtually no attempt was made by AVMF to market the program (just four loans were approved in 2004) or collect the 125 reportedly delinquent accounts.

Auxiliary President Diana Turner could not be reached for comment, but in a November newsletter she writes: "We feel we can no longer wait to protect this fund. The (executive) board and the oversight committee have been diligent and tried for over three years to get the AVMF to improve their administration of the (student loan fund), and it has only gotten worse."

Gordon explains that low national interest rates made the Auxiliary's high rates and low cap unattractive. Regarding delinquent accounts, "How hard do you want to go after young poor veterinary graduates who aren't making payments?" he asks.

Remaining solvent

Despite the criticism, foundation leaders including Gordon are breathing life into AVMF. Amundsen remains confident a "huge fundraising project" tied to a yet-to-be-named product manufacturer will keep AVMF finances in the black. In April, the New Jersey Veterinary Medical Association voted unanimously to support Gordon, the state's delegate, in his work "responding to and dealing with AVMF political issues."

"I am proud to say that I as well as our board have not deviated from our commitment to the foundation's mission," Gordon says.

"We have chosen to ignore personal agendas. The bottom line is AVMF giving has gone up every year."